Total No. of Questions : 5] SEAT No.

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P7880 [Total No. of Pages : 6

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First Year M.BA.

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202-GC-08 : FINANCIAL MANAGEMENT

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(2019 Pattern Revised) (Semester-II)

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Time : 2½ Hours] [Max. Marks : 50

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Instructions to the candidates:
1) All questions are compulsory.
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2) Each question carry equal marks.

3) Use of simple calculator is allowed.
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Q1) Solve any five [5×2=10]

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a) maximisation of wealth of Shareholders is reflected in.

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i) Sales maximisation ii) Number of Shareholders

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iii)
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Market price of equity shares iv) Stock market index
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3a
b) Which of the following is a measure of debt service capacity of a firm
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i) Current Ratio ii) Debt-equity Ratio

iii) Debtors turnover Ratio iv) Interest coverage ratio
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c) In case, the firm is all equity financed, WACC would be equal to

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i) Cost of debt ii) Cost of equity

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iii) Neither (i) Nor (ii) iv) Cost of equity plus cost of debt
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d) Which is not a part of investment decision in financial management.

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i) Dividend payout decision

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ii) Capital budgeting decision

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iii) Working capital management

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iv) Credit policy towards customers

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e) The figures shown in financial statement are converted to percentage so

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as to establish each element to the level of the statement in

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i) Common size statement ii) Comparative statement

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iii) Cash flow statement iv) Trend ratios

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f) How wealth of shareholder is calculated ?

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g) Write the formula to compute operating leverage and financial leverage.

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h) Define fund flow statement.

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P.T.O.
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[6118]-2002 1
Q2) Solve any 2 [2×5=10]

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a) How the wealth maximisation is better operative criterion than profit

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maximisation.

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b) Write a note on comparative financial statements.

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c) Explain the concept of trading on equity.

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Q3) a) JKL Ltd. has the following book value capital structure as on 31-03-2023:
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[10]
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Source Amount (H)

Equity share capital (2,00,000 shares) 40,00,000
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11.5% preference shares 10,00,000

10% Debentures 30,00,000
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The equity share of the company sells for H 20 the next expected dividend
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is Rs. 2 per share. It is expected to grow at 5% p.a. for ever. Assume a
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35% corporate tax Rate. Required.
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3a
i) Compute WACC of the company based on the existing capital
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structure.
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ii) Compute the new WACC, if the company raises an additional H 20

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lakhs debt by issuing 12% debentures this would result in increasing

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the expected equity dividend to H 2.40 and leave the growth rate
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unchanged, but the price of equity share will fall to H 16 per share.
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b) ABC Ltd. has an annual sale of 50,000 units at H100 per unit the company
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works for 50 weeks in the year. The cost break up is given as below.
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Element of Cost Cost/Unit (H)

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Raw material 30
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Labour 10
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Overheads (including depreciation H5) 20

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Total cost 60
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Profit 40
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Selling price 100

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 The company has the practice of storing raw materials for 4 weeks

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requirement. Wages and other expenses are paid after a las of 2 weeks.

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The debtors enjoy a credit of 10 weeks and company gets a credit of

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4 weeks from supplier. The processing time is 2 weeks and finished

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goods inventory is maintained for 4 weeks.

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From the above information determine a working capital requirement.

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Allowing for 15% contingencies by cash cost approach.

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Q4) a) AB Ltd. has the following profit & loss A/c for the year. Ending 31st
March 2023 and the Balance sheet as on that date [10]
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Profit & Loss Account

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Particulars Amount Particulars Amount
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(H in Lakhs) (H in Lakhs)
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3a
Opening stock 1.75 Sales : Credit 12.00
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Add : manufacturing cost 10.75 Sales : Cash 3.00

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Less : Closing stock (1.50)

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Cost of goods sold 11.00

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Gross profit 4.00
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15.00 15.00
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Administrative exp 0.35 Gross profit 4.00

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Selling exp 0.25 Royalty income 0.09

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Depreciation 0.50
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Interest 0.47
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Income tax 1.26

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Net profit 1.26

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4.09 4.09
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 Balance Sheet

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Liabilities Amount Assests Amount

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(H in Lakhs) (H in Lakh)

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Equity shares of Rs. 10 3.50 Plant & Machinery 7.50

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10% preference shares 2.00 Goodwill 1.40

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Reserve & surplus 2.00 Stock 1.50

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Long term loan (12%) 1.00 Debtors 1.00
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Debentures (14%) 2.50 Prepaid expenses 0.25
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Creditors 0.60 marketable Securities 0.75

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Bills payable 0.20 Cash 0.25
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Accrued expenses 0.20

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Provision for tax 0.65
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12.65 12.65
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3a
Comment on the financial position of the company on the basis of
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following ratios.
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i) Current ratio
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ii) Debt equity Ratio

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iii) Interest coverage Ratio

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iv) Stock Turnover Ratio.
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v) Debtors turnover Ratio
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b) XYZ Ltd. has obtained the following data concerning the average working
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capital cycle for other companies in the same industry. Using the data
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determine working capital cycle for the company and briefly comment on
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it
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Raw material stock turnover 20 days

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Credit received 40 days

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WIP turnover 15 days

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Finished goods stock turnover 40 days

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Debtors collection period 60 days

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95 days
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 The company has provided following information

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Particular Amount

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Sales 30,00,000

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Cost of production 21,00,000

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Purchases 6,00,000
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Average raw material in stock 80,000

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Average WIP 85,000

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Average FG 1,80,000
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Average creditors 90,000

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Average Debtors 3,50,000
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Q5) a) Machine a Cost H 1,00,000 payable immediately. Machine B costs

H1,20,000 half payable immediately and half payable in one year’s time.
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The cash receipts expected are as follows. [10]

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year (at end) Machine A (H) Machine B (H)
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1 20,000 0
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2 60,000 60,000
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3 40,000 60,000
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4 30,000 80,000
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5 20,000 0
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At 7% opportunity cost. Which machine should be selected on the basis

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of NPV ? Will your decision change if proposals are evaluated on the

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basis of IRR?
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[6118]-2002 5
 b) A firm whose cost of capital is 10% is considering two mutually exclusive

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project X and Y. the details of which are.

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Year Project X (H) Project Y(H)

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1 10,000 50,000

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2 2/1 13 20,000 40,000
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3 30,000 20,000
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4 45,000 10,000

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5 60,000 10,000
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Evaluate the project on the basis of Net present value, profitability Index

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and IRR and suggest most profitable investment.

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